JM Financial Ltd. expects earnings growth outlook for the next financial year to be in the range of 18-25 percent.
This comes after most sectors missed earnings estimates in the first quarter of the ongoing financial year. “At the beginning of the quarter we expected almost a 20 percent growth in earnings, but ended up with about 7 percent year-on-year growth,” Suhas Harinarayanan, head of Institutional Equity Research at JM Financial, told BloombergQuint, adding that the misses have mostly been at the sales, Ebitda and PAT level. “Overall financials in large banks missed estimates. A slowdown in the auto sector has lingered too long and the metals sector also performed badly.”
A lot of the payments to small and medium enterprises have not been released yet, Harinarayanan said. “We are seeing many capex cuts.”
JM Financial has tracked capex guidance for the last two quarters and it has been on a negative feedback loop, he said. “Among the larger capex-intensive sectors like metals and industrials, about 11 to 12 companies have revised their capex downwards.” The negative feedback loop, he said, could translate into lower demand going forward.
For 148 companies under the investment bank's coverage that reported earnings, profit after tax lagged estimates in the quarter ended June amid a weak earnings season and grew 6.7 percent year-on-year compared to an estimate of 20.7 percent. This, according to a report by JM Financial, was dragged down by non-bank lenders, private banks, pharma and cement companies.
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